Social Security Smarts

Rethinking Retirement

Social Security Smarts

If a job seems unpleasant at 61, it can seem downright intolerable at 62 because now you have the option of taking Social Security.

I turned 62 a few months ago. As birthdays go, this one was nothing special (champagne doesn’t flow for birthdays that end in 2). But it did represent one milestone: I’m now eligible for Social Security benefits.

See Also: Social Security Special Report

That doesn't mean I plan to retire anytime soon, nor do I expect to sign up early for Social Security. If I were to take benefits at 62, I'd have to accept a 25% reduction in the amount I'd receive at 66, my full retirement age, and I'd lose $1 of my benefit for every $2 I earn above $15,480 (in 2014).

Once I hit 66, I can make as much as I want without penalty, and for each year I delay signing up after that, I'll get an 8% increase in benefits, until age 70. For all those reasons, it makes sense for me, and for most people, to wait until full retirement age or longer to claim Social Security. (For more on getting the most out of your benefits, see


Fairness and loss. But what makes sense financially isn't necessarily the key factor in how people make this important decision. A sense of fairness and an aversion to loss can both play a role in deciding to claim early, according to a report by Suzanne Shu, of the University of Cali­fornia at Los Angeles, and John Payne, of Duke University. Some people may feel strongly that they earned the benefits and are entitled to them as soon as possible. Others believe that they'll lose out if they die before the break-even point (when the total payout you'd get by waiting until full retirement age to claim benefits equals the payout you'd receive by claiming at 62).

How you view life expectancy can also make a difference in your claiming decision. According to the Shu-Payne report, survey respondents who were asked the age they expected to die by estimated it to be ten years earlier than those asked the age they were expected to live to. The die-by group said they would claim earlier than the live-to respondents, probably because thinking about dying doesn't lend itself to planning for the future.

Being unhappy at work is another reason for taking early benefits. If a job seems unpleasant when you're 61, it can seem downright intolerable at 62, not because the job changed but because now you have the option of taking Social Security, according to a 2011 report on Social Security decision-making by Melissa A.Z. Knoll. Further, it's human nature to overestimate how happy you'll be in retirement compared with how happy you are now, and to underestimate the bad stuff that could happen later, such as high health care costs. Even personality matters. If you're impatient, you'll likely grab the money as early as you can.

Think it through. When you're dead, you won't care who came out ahead, you or Social Security. But you'll care a lot, says Shu, if you live to 70 and beyond and find yourself strapped because you took your benefits early. Similarly, says coauthor Payne, you're better off assuming you'll live to the outer limits of life expectancy—say, 90 or 95—than lowballing the age at which you'll die. "Think about being poor at 90," he says.


As for hating your job, look at your bottom line before deciding to ditch it for a reduced benefit. Finally, don't assume retirement will be clear sailing just because it's in the future. Stuff happens. (Preretirees, take note of these 5 Costly Retirement Surprises.)

My plan? As a member of a long-lived family, I'll wait until age 70 to claim Social Security and take money out of my retirement accounts to fill any income gap. If I die before 70, I should still have some savings to leave to my kids. But if I live until 70 or longer, I'll have more income—and a better chance of making my savings last.

As someone who's as patient as the next person but who also hates to lose, I'd say that's a win-win scenario.

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